The U.S. equity markets continued to favor large and growth-oriented securities.

The Health Care sector hurt much of the fund’s performance

Stock selection was offset by group weighting, which detracted from performance.

Looking Back

During the fourth quarter of 2017, the U.S. economy maintained its positive momentum with continued employment gains, strong readings from the U.S. Purchasing Managers Index and interest rates that increased from the third quarter. Most global equity markets were positive throughout the quarter. The U.S. equity markets were led by the S&P 500 Index, which was up 6.64%, followed by large-cap stocks represented by the Russell 1000 Index, up 6.58%, followed by mid-cap stocks represented by the Russell Mid Cap Index, up 6.05%, followed by small-cap stocks represented by the Russell 2000 Index, up 3.33%% during the quarter. Mid-cap growth stocks also outperformed mid-cap value stocks, continuing the trend throughout the year.

During the quarter, the portfolio team added the following positions: Osram Licht AG, Mediobanca Spa, Veeva Systems, PRA Health Sciences and Ultragenyx Pharmaceuticals. Also during the quarter, the portfolio subtracted the following positions in pursuit of better opportunities: Sage Therapuetics, Dave & Busters, Tesaro, Allied Irish Banks and Dycom Industries.

Performance

Federated Kaufmann Fund Institutional Shares returned 5.74% for the three months ended December 29, 2017. That compares with its benchmark, the Russell Mid-Cap Growth Index, which returned 6.81% during the same period.

Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after-tax returns, click on the Performance tab.

Click the Performance tab for standard fund performance.

Performance Contributors

Stocks that made a positive contribution to performance included arGEN-X Se, Nektar Therapeutics, GDS Holdings Ltd, Splunk Inc. and XPO.

Click on the Portfolio Characteristics tab for the fund’s top 10 holdings.

As the U.S. economy enters 2018, the positive momentum in output has accelerated from its tepid pace in the previous few years as global growth has picked up. U.S. business confidence reached new highs and the U.S. passage of historic corporate tax reform may help sustain the recent GDP acceleration in 2017. Earnings growth drove 2017’s equity market rally helped by stable global growth, a weaker dollar as well as accommodative central bank policies around the world. Global markets have looked past most of the political discourse as the focus returned to company earnings and investment growth in the coming years. Federated Kaufmann Funds expect to be focused in those sectors that historically have had little dependence on the economy improving significantly to generate significant earnings growth opportunities.

During the fourth quarter of 2017, the fund had approximately 72% of its portfolio invested in four sectors: Information Technology, Health Care, Consumer Discretionary and Industrials. The sector weightings of the portfolio are a byproduct of our bottom-up stock selection strategy with a team of sector-specialist portfolio managers. We seek to find companies that have company-specific catalysts for growth rather than develop macro themes to construct sector weightings. These sectors also have historically provided good opportunities for bottom-up growth investors.

Key Investment Team

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Investors should carefully consider the fund's investment objectives, risks, charges and expenses before investing. To obtain a summary prospectus or prospectus containing this and other information, contact us or view the prospectus provided on this website. Please carefully read the summary prospectus or prospectus before investing.

Mutual funds are subject to risks and fluctuate in value. Click on Performance for fund specific risks.